Formal-Informal Relations in Azerbaijan

In the neopatrimonial context, formal institutions cohabit the governance space with informal institutions. Azerbaijan is a good example of how formal institutions such as referendums, elections and the judiciary are used as window dressing behind which patrimonial relationships thrive and proliferate. While written rules act as a façade, they perform useful functions for the regime, allowing the ruler to create the appearance of legality and maintain autocratic control of the system. However, the patrimonial informality (or informalities) that underpin the neopatrimonial system and govern actual behaviour ultimately undermine the formal 'institutions as constraints' basis, which is necessary for democracy and the impartial rule of law to take root

The Quality of Education in Azerbaijan: Problems and Prospects

Over the past two decades, Azerbaijan has experienced a drastic decline in the quality of education, particularly at the higher education level. Although the oil industry experienced a boom for nearly a decade, the education sector stagnated and underperformed. The level of funds allocated to education remained unusually low, especially compared to the funds allocated to infrastructure development and vanity projects. Consequently, the quality of public education deteriorated precipitously, falling behind even the Commonwealth of Independent States (CIS) regional standard. Using a demand-and-supply perspective, I argue that the diversion of public funds away from human capital development toward unproductive investments by rent-seeking elites on the supply side and low returns to high-quality education (valuing educational certificates more than knowledge and skills obtained) and an excessive reliance on patronage and personal connections on the demand side are the key impediments to the advancement of educational quality in Azerbaijan. Further structural reforms are required to address these perverse incentives embedded in the existing institutional framework

Caspian Energy Producers in the 'New Oil Order': Neglected by the West, Looking East

The shale revolution and the transition to a low-carbon economy in the industrialized West have ushered in a new era of energy. The Trump administration in the U.S. has pushed a new ‘America first’ energy policy aimed at transforming the U.S. into a global energy superpower. The rise in shale gas production has brought energy prices tumbling down. Traditional oil producers have been hit hard by low oil prices. The new energy order also means a lower demand in the West for Caspian fossil fuels. International oil companies have shown no interest in investing in new Caspian energy developments, and the idea of building a seabed Trans Caspian Pipeline (TCP) to connect Central Asia to Azerbaijan remains stuck on paper. In this article, I examine the impacts of these macro-structural changes on Azerbaijan, Kazakhstan and Turkmenistan. I argue that in the absence of Western oil company investments, and given the lack of U.S. and EU leadership in developing new energy projects, Caspian energy producers, with the exception of those in Azerbaijan, are looking to China and other Asian countries for export markets. Turkmenistan already ships almost all its gas exports to China and is pressing ahead with a new pipeline (TAPI) to deliver gas to Pakistan and India. With substantial Chinese investments in its energy sector and an existing pipeline connection to China, Kazakhstan has increased its gas exports to China. In the case of limited capacity of Kazakhstan’s westbound pipelines, the country is considering plans for diverting some of its growing oil output to China. Azerbaijan has the biggest stake in a TCP because of the urgency of switching to gas. Baku has borrowed billions of dollars to build a network of pipelines (the Southern Gas Corridor) to ship its gas to southern Europe. However, there is currently not enough gas available to make this pipeline project commercially viable

Azerbaijan: Low Oil Prices and their Social Impact

This article looks at the impact of low oil prices and the resulting shortfall in oil rents on the Azerbaijani government's social-assistance policies and related expenditures and discusses its implications for social cohesion in the long run. It argues that the deployment of strategic fiscal reserves and citizens' continuing reliance on informal 'safety nets' have cushioned the negative social impacts of the oil plunge. However, there is a risk that the deepening of an economic crisis exacerbated by weak private sector development and missing major reforms in education and social sectors across the board might undermine the social contract. To mitigate the adverse social impacts of the ongoing crisis, the government must conduct a more comprehensive and wide-ranging reform of the labor market, of the access to and quality of education and of the private business sector to stimulate formal job creation, especially among youth and rural populations as well as in health care to provide quality and affordable health care, in education to improve human capacity and domestic labor skills, and in social policies to ensure inclusive and sustainable social welfare provision

Urban Planning in Baku: Who is Involved and How It Works

This article examines the urban governance system of Baku City with a focus on recent urban reconstruction projects. First, I outline the mechanism of oil surplus recycling that underlies Baku's recent construction boom. Second, I explore the regulatory regime and the roles of different government agencies engaged in "implementation games". City politics has thus turned into an arena for the neopatrimonial scramble for public resources. Baku’s urban policy decisions reflect the confluence of interests of bureaucratic patronage networks and oligarchic-business groups. What is good (profitable) policy for these rent-seeking groups can harm social welfare, the quality of undersupplied social services (such as education and health care), and other public goods needed by ordinary residents, fueling the growing tendency toward urban segregation by class and income

Azerbaijan's Social Policy Response to COVID-19

Azerbaijan's social assistance and income support schemes adopted during the COVID-19 pandemic need to be seen within the context of the existing social protection system and safety nets. While the existing system is operational and has the technical capacity to respond and deliver social policies, it has had two key shortcomings: 1) low benefit rates and 2) issues in coverage, notably the exclusion of informal employees and migrant workers. Left unaddressed ex ante, they caught the system off-guard ex post when the coronavirus pandemic broke out. As a result, although COVID-related social assistance measures (especially cash transfers) were implemented without delay and provided some immediate relief for vulnerable and affected social groups, they fell short of covering sizable sections of the population, namely informal workers and Azerbaijanis working in Russia. It is also doubtful that such assistance can improve future wellbeing of vulnerable groups, whose living standards are likely to worsen during and after the economic fallout from the pandemic

Armenia's Velvet Revolution in the Discourse of the Azerbaijani Elite

This article examines the discourse of the Azerbaijani elite surrounding Armenia's "velvet revolution" in the spring of 2018, focusing on the implications of its potential emulation in Azerbaijan as well as on the management of the Nagorno-Karabakh conflict. The article shows that the Armenian revolution has had no impact on protest activity in Azerbaijan due to structural constraints on collective action and the lack of a common frame of reference. In addition, the events in Armenia were mainly viewed in Azerbaijan through the prism of Karabakh. Even though this event revealed an initial moderate softening of the Azerbaijani government's stance, the unexpectedly hardline position taken by the new Armenian leader prompted Azerbaijan to adopt a more hawkish position. This, in turn, has led both sides to revert to the usual cycle of the discursive zero-sum game. While this suggests that ethnic discourses are not completely immutable, if a peaceful resolution is valued, it will require a more fundamental change in the ideologies of the current political actors and in their underlying nationalist master frames. Given the present setup of political forces in both Armenia and Azerbaijan, where exclusionary versions of nationalist ideologies prevail, this does not seem to be a possibility in the near future

The 2015 Parliamentary Elections in Azerbaijan: The Neglected Category of Independents

About 35 percent of Azerbaijan's parliament members are independents and an even larger number of independents routinely run for parliament. Who are those independents and should we take them seriously? In this article, I show that independents are not a uniform group, and there are three main subtypes: public figure independents, "fake" independents, and independents vying for public visibility. I briefly provide examples for each subtype and argue that with the downfall of traditional opposition parties over the past 10 years and the disturbing irrelevance of political parties in general, non-fake independent candidates have taken up, within the prescribed limits, the job of airing popular grievances. Election cycles allow independents to take a more proactive stance and run grassroots and social media campaigns. Future research should not disregard independents as mere pro-regime puppets if they want to get a fuller understanding of the political dynamics within the electoral authoritarian regimes

The Informal Economy in Azerbaijan

This article looks at various estimates of the scale and composition of the informal economy in Azerbaijan, focusing on the extent and structure of informal employment. It shows that informal economic activity makes up a considerable part of the country’s GDP and that the share of informal employment is high. The extent of the informal economy has negative consequences for the state's collection of taxes and the social security protection of those employed without contract. Challenges for the foreseeable future include the ability of an oil-dependent economy to create jobs for the growing number of youths, risks associated with social security exclusion of informal workers, and the lack of political will to implement structural reform to eliminate informal payments and bureaucratic control of the economy

Tackling the Resource Curse: The Role of Democracy in Achieving Sustainable Development in Resource-Rich Countries

This report provides a critical survey of the academic and policy literature that investigates the role of democratic arrangements and practices in sustainable and inclusive development through the prudential governance of oil, gas and mining resources. It covers different government systems, world regions and countries. The findings suggest that if the question is 'does democracy lead to better development outcomes in countries rich in oil, gas and mining resources?', the 'yes' answer should be a very cautious and qualified one. While certain aspects of democratic arrangements and practices are empirically linked to sustainable and inclusive development outcomes, others are not - and may, under some conditions, undermine the achievement of such outcomes. Finally, several theoretical and methodological issues are identified that affect many studies in this literature and hinder making inferences from their findings. Six illustrative cases are discussed to highlight important aspects of the relationship between democracy, natural resources and development